by Peter Milios
Earlier today, the S&P/ASX 200 stock index of Australia experienced a decline of 2.1 per cent and hit a new low of 6956.7, which is close to its lowest point of the year and a crucial technical support level at 6905.3.
At noon however, the ASX recovered slightly, and is now 1.91 per cent lower at 6,973.20.
The Energy, Tech, and Financial sectors all suffer greater losses, potentially due in part to global investors offsetting their losses in US banks by selling off their holdings in the Australian market. This comes after a strong start to the year.
The four major banks experience a decline of 1.5 per cent to 2.6 per cent, while Macquarie plunges by 3.7 per cent.
The SPI futures are pointing to a fall of 153 points.
Best and worst performers
All sectors are in the red. The sector with the fewest losses is Utilities, down 0.25 per cent. The worst-performing sector is Information Technology, down 3.67 per cent.
The best-performing large cap is Mercury NZ (ASX:MCY), trading 3.63 per cent higher at $5.99. It is followed by shares in Newcrest Mining (ASX:NCM) and Northern Star Resources (ASX:NST).
The worst-performing large cap is Computershare (ASX:CPU), trading 6.78 per cent lower at $22.12. It is followed by shares in Yancoal Australia (ASX:YAL) and Whitehaven Coal (ASX:WHC).
Asian markets
Asia-Pacific markets tumbled on Tuesday in a volatile session, after Wall Street saw sharp losses overnight as investors grappled with the fallout of failed banks in the U.S., including Silicon Valley Bank.
In Japan, the Topix led gains and fell 3.2 per cent and the Nikkei 225 fell 2.3 per cent as shares of Softbank Group fell as much as 3.4 per cent. in Asia’s morning trade. South Korea’s Kospi also fell by 2.2 per cent and the Kosdaq was 3.14 per cent lower.
Biden says deposits safe, efforts to find buyer for SVB continue
A day after US regulators established a mechanism to backstop deposits, President Biden sought to reassure Americans their savings were safe and repeated that no losses will be borne by taxpayers ((NY Times). Biden also said he will call on Congress and banking regulators to strengthen rules for banks. Top Democrats echoed calls for tougher rules, criticising a 2018 law signed by President Trump that reduced the number of banks subject to stricter Fed oversight (Axios). Efforts to find a buyer for SVB continue with regulators reportedly weighing a second auction after an initial attempt on the weekend failed to result in a deal (CNBC). Apollo Global Management expressed interest in acquiring part of SVB’s $73.6B loan book (Bloomberg). Meanwhile, the Fed announced an internal review on supervision and regulation of SVB, to release a report by 1-May (Bloomberg).
Markets see one more 25 bp hike before several rate cuts by year end
Fed rate path expectations have flattened sharply amid the SVB fallout. Markets now only see one rate hike left in this cycle, with pricing for a ~40 per cent chance of no rate hike at the March FOMC meeting (22-Mar), up from a 0 per cent chance on Friday. Markets have also moved the odds of a 50 bp hike down to 0 per cent from a high of over 80 per cent last week. For the May FOMC meeting, odds now close even for no rate hike vs 25 bp hike in May, with median peak fed funds rate of 4.75 per cent, down nearly 100 bp from a peak of 5.69 per cent after Fed Chair Powell’s appearance last week. Rate cuts are also seen starting in June, with markets expecting four 25 bp cuts by year-end to 3.75-4.0 per cent. Given the recent financial system stresses, Goldman Sachs economists said they no longer see a 25 bp hike in March, with considerable uncertainty beyond this month. Bank of America analysts also held their March 25 bp rate hike forecast and peak rate of 5.25-5.50 per cent, saying if the Fed’s moves to ring-fence bank stress is successful, it will allow it to continually hike to sufficiently restrictive levels. Nomura had among the most dovish outlooks, saying they expect a 25 bp rate cut this month, as well as a halt to balance sheet reduction.
Company news
Patrys (ASX:PAB) has announced that their preclinical data supports synthetic lethality mechanisms to treat relevant cancers. Patrys Chief Executive Officer and Managing Director, Dr. James Campbell, said, “This study confirms the potential to use deoxymabs as a single agent to treat cancers which have pre-existing mutations that compromise their DDR systems.” Shares are trading 4.3 per cent higher at 2.5 cents.
Mt Monger Resources (ASX:MTM) has completed a drilling program at its East Laverton project in WA. Commenting on the completion of the drilling program, Managing Director Lachlan Reynolds said: “the program involved testing of a number of different geological targets, including the known rare earth element mineralisation anomalies at the Pt Kidman prospect.” Shares are trading 7.1 per cent higher at 10.5 cents.
Immutep (ASX:IMM) announced the initiation of Phase II/III trial for metastatic breast cancer. The first patient is expected to be enrolled in early quarter 2 of CY2023. Shares are trading 3.8 per cent lower at 25.5 cents.
Commodities and the dollar
Gold is trading at US$1782.70 an ounce.
Iron ore is 1.8 per cent higher at US$132.35 a tonne.
Iron ore futures are pointing to a 1.1 per cent rise.
One Australian dollar is buying 66.67 US cents.
